Notice of Supplemental Authority, Fattah v. IRS, FBI, FOJ

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA

CHAKA FATTAH, JR., : CIVIL ACTION
Plaintiff :
:
v. : No. 14-1092-TJS
:
UNITED STATES OF AMERICA, et al., :
Defendants

PLAINTIFFS NOTICE OF SUPPLEMENTAL AUTHORITY
Plaintiff Chaka Fattah, Jr. hereby gives notice of persuasive legal authority relevant to
this matter.
Plaintiff became aware of the herein authority over the past few business days, after
briefing was completed on June 10, 2014. Plaintiff submits the reasons for the supplemental
citations, while attempting to do so without argument. Plaintiffs understanding is that
Defendants will have an opportunity to respond, as long as, in this Courts view, their
response is filed promptly, and limited to the issues in this notice of supplemental authority.
In the alternative, Plaintiff respectfully asks the Court to construe this filing an
implicit Motion For Leave of Court to Supplement the Record.
26 U.S.C. 7433 claims
A. There is authority that this Court should determine that Congress is presumed to
have acted intentionally as it relates to 7433 covering conduct by all IRS employees
or officers, including special agents, and regardless of job title or division.
We begin with the familiar canon of statutory construction that the starting point for
interpreting a statute is the language of the statute itself. Absent a clearly expressed
legislative intention to the contrary, that language must ordinarily be regarded as conclusive.
Consumer Prod. Safety Commn v. FTE Sylvania, Inc., 447 U.S. 102, 108 (1980) The
primary indication of [Congress] intent is the language of the statute. United States v.
Case 2:14-cv-01092-TJS Document 18 Filed 07/21/14 Page 1 of 23
Aguilar, 21 F.3d 1475, 1480 (9th Cir. 1994), affd in part, revd in part on other grounds, 115
S.Ct. 2357 (1995).
[I]n interpreting a statute a court should always turn to one cardinal canon before all
others.[C]ourts must presume that a legislature says in a statute what it means and means
in a statute what it says there. Connecticut Natl Bank v. Germain, 503 U.S. 249, 253-252
(1992).
When Congress amends one statutory provision but not another, it is presumed to
have acted intentionally (emphasis added), see EEOC v. Arabian American Oil Co., 499 U.S.
244, 256, and negative implications raised by disparate provisions are strongest where the
provisions were considered simultaneously when the language raising the implication was
inserted, Lindh v. Murphy, 521 U.S. 320, 330. Pp. 5-6.
In the present matter, 7433 was amended on two (2) occasions since its enactment in
1988 as part of the Taxpayer Bill of Rights. See Technical and Miscellaneous Revenue Act
of 1989. Pub. L. No. 100-647 (1988). In 1996, Congress amended 7433, the following
amendments were made:
1996 - Subsec. (b). Pub. L. 104-168, Sec. 801(a), substituted "$1,000,000" for "$100,000".
Subsec. (d)(1). Pub. L. 104-168, Sec. 802(a), amended par. (1) generally. Prior to
amendment, par. (1) read as follows:"(1) Requirement that administrative remedies be
exhausted. - A judgment for damages shall not be awarded under subsection (b) unless the
court determines that the plaintiff has exhausted the administrative remedies available to
such plaintiff within the Internal Revenue Service.

In 1998, as a result of changes by the IRS Restructuring and Reform Act of 1998, the
following amendments were made:
1998 - Subsec. (a). Pub. L. 105-206, Sec. 3102(a)(1)(A), inserted", or by reason of
negligence," after "recklessly or intentionally. Subsec. (b). Pub. L. 105-206, Sec. 3102(a)(1)
(B)(i), (c)(2), in introductory provisions, inserted "or petition filed under subsection (e)"
after "subsection (a)" and inserted "($100,000, in the case of negligence)" after
$1,000,000". Subsec. (b)(1). Pub. L. 105-206, Sec. 3102(a)(1)(B)(ii), inserted "or
negligent" after "reckless or intentional. Subsec. (d)(1). Pub. L. 105-206, Sec. 3102(a)(2),
substituted "Requirement that administrative remedies be exhausted" for Award for
damages may be reduced if administrative remedies not exhausted" in heading and amended
text of par. (1) generally. Prior to amendment, text read as follows: "The amount of damages
awarded under subsection (b) may be reduced if the court determines that the plaintiff has
not exhausted the administrative remedies available to such plaintiff within the Internal
Revenue Service. Subsec. (e). Pub. L. 105-206, Sec. 3102(c)(1), added subsec. (e).

It is a fact that Congress amended 7433. Using the above authority in EEOC,
Congress amended 7433, as shown above, and did not amend the language any officer or
employee of the Internal Revenue Service. Plaintiff respectfully requests that the Court
review the authority and its applicability in the present matter about whether it should be
presumed that Congress did so intentionally.
First, this section is in reference to Plaintiffs argument that Defendants contention
about Congresss intent is inaccurate (Doc. 15-1, page 12). Second, this section is in
reference to Plaintiffs argument that special agents [Michael Scheffer and Edward
Manning] fall squarely into Section 7433s plain language any officer or employee of the
Internal Revenue Service. (Doc. 17, pages 2-3) That argument was also in the original
response (Doc. 15-1, page 19) Plaintiff submitsdoes not state that the special agentsare
not IRS employees as defined by 7433. Third, this section references Plaintiffs argument
about whether or not 7433 is limited to the actions of a revenue officer.
Discussing the present law in 1988 [before passage of 7433] the U.S. Senate said:
Taxpayers do not have a specific right to bring an action against the Government for
damages sustained due to unlawful actions taken by an IRS employee. Under the heading
Reasons for Change it further states The committee believes that taxpayers should be
provided a civil cause of action to compensate them for damages that arise out of the
unlawful actions or inaction of IRS employees that occur during the determination or
collection of federal taxes (emphasis added) S. 2223, 100th Cong., 2d Sess. S 123 (1988).
The Final version of 7433 encompassed two (2) modifications from the Senate draft. The
final version removed a provision providing the right to sue for violations of any Federal
law and it removed the term determinations. The parties in the present matter have not
disputed that assessment falls outside the scope of 7433. The Court held has held that
determinations would have included assessments Gerald Schreiber v. Robert
Mastriogivannia 214 F.3d 148 (3rd Cir. 2000). Plaintiffs Brief (Doc. 15-1, page 11) The
distinction is between collection and assessment. Plaintiff stated Plaintiff submits
that the only recognition of the limited scope of collectionis that the conduct must be
regarding collection, not assessment. (Doc. 15-1, page 11) Defendants cited Hart v. United
States in their Brief (Doc. 14-1, page 5) about this issue.
In Crowd Management Services, Inc. v. United States of America 792 F. Supp.
87 (1992)(District Court, D., Oregon.), the Court said The Taxpayers' Bill of Rights was
enacted to provide additional safeguards to taxpayers so as to strike a fairer balance between
the legitimate interests in protecting taxpayers who are honestly attempting to meet their tax
burdens and in allowing the IRS to continue its efforts to vigorously enforce the tax laws. See
134 Cong.Rec. 33563 (daily ed. Oct. 21, 1988) (statement of Rep. Pickle) ("I am satisfied
that the taxpayers safeguards included in this bill will protect the legitimate interests of
taxpayers who are honestly attempting to meet their tax obligations, while, at the same time,
allowing the IRS to continue its efforts to vigorously enforce our tax laws."); Id. at S 15074
(daily ed. Oct. 7, 1988) (statement of Sen. Pryor) ("I ... believe that the taxpayers' bill of
rights would correct the balance of fairness in favor of the American taxpayer, and it will do
so without hindering the IRS' ability to collect lawfully owed taxes."); Id. at S 15078
(statement of Senator Levin) ("While it is important that the IRS be given powerful
enforcement capabilities it is equally vital that these capabilities be used fairly)(emphasis
added). This section is in reference to Plaintiffs argument that Defendants contention about
Congresss intent is inaccurate (Doc. 15-1, page 12).
B. There is authority to show that Grand Jury Secrecy is meant to protect the
reputation and other rights of an individual under investigation, in this matter the
Plaintiff.
Plaintiff submits the following in reference to Plaintiffs argument that the grand jury
subpoenas have no effect on the 7433 claim. Plaintiff stated (Doc. 17, page 3), the grand
jury subpoenas do not allow any IRS officer or employee to leak information to the media.
The U.S. Court of Appeals for the Seventh Circuit said One of the principle reasons
for preserving the secrecy of grand jury proceeding is to protect the reputations of both
witnesses and those under investigation. (emphasis added) Lucas v. Turner, 725 F.2d 1095,
1100 (7th Cir. 1984).
In Douglas Oil Co. v. Petrol Stops Northwest, 441 U.S. at 219, 99 S. Ct. at 1673, the
Court said [B]y preserving the secrecy of [grand jury] proceedings we assure that persons
who are accusedwill not be held up to public ridicule.
In re:Grand Jury of Cuisinarts Inc., 665 F.2d 24, 33 (2d Cir. 1981), the Court stated
A glaring injustice could be inflicted and irreparable injury caused to the reputation of a
person if it were to become known that there is or ever was before the grand jury any
proceeding concerning him if he were not subsequently indicted.(emphasis added) In the
present matter, it is undisputed that Plaintiff has not been charged with any crime, by
indictment or otherwise.
The Supreme Court has held that [g]rand jury secrecy is as important for the
protection of the innocent as for the pursuit of the guilty.(emphasis added) United States v.
Sells Engg, Inc. 463 U.S. 418, 424-25 (1983)
The invocation of grand jury interests is not some talisman that dissolves all
competing needs. Butterworth, 494 U.S. at 630, 110 S. Ct. 1376
Courts have interpreted the secrecy requirement imposed by 6(e) to apply not only
to information drawn from the transcripts of grand jury proceeding, but also to anything
which may tend to reveal what transpired before the grand jury. Lance, 610 F.2d at 216
The U.S. Court of Appeals for the Fifth Circuit has held that the secrecy provisions
of Rule 6(e) to apply not only to disclosures of events which have already occurred before
the grand jury, such as a witnesss testimony, but also to disclosures of matters which will
occur, such as statement which reveal the identity of persons who will be called to testify.
(emphasis added).
Plaintiff notes the grand jury subpoenas he received requested both the production of
documents, and his testimony at a hearing date and time, shown on page 2 of the grand jury
subpoenas. Media articles about Plaintiff in 2012 and 2013 stated that Plaintiff was under
federal investigation, and media articles referenced subpoenas, and the grand jury. A
Philadelphia Magazine article, incorporated by reference in the Amended Complaint (Doc.
11 49) stated ongoing federal grand jury investigation of [Chaka] Fattah Jr. This
references, in connection with Cuisinarts, Douglas Oil Co., and Sells Plaintiffs argument
that The negative media stories cited in the amended complaint contain significant amounts
of information. Some of which Plaintiff alleges is subject to 6304(b).
C. There is authority that shows that Congress has created an extensive statutory
scheme with respect to assessment of taxes, none of which could replace Plaintiffs
7433 claim in the present matter. The current claim is distinguishable from a claim
for wrongful assessment.
The section references Plaintiffs argument that the February 2012 events were a not
an assessment action as a matter of law (Doc 15-1, page 7-20). See 26 U.S.C. 6203, Method
of Assessment, The assessment shall be made by recording the liability of the taxpayer in
the officer of the Secretary
Many Federal Courts have mentioned when dismissing a Section 7433 claim that
while Section 7433 does not allow a claim based on assessment, that individual American
Citizens have an adequate remedy at law for challenges to assessments (citations omitted).
Plaintiffs 2010 transcript (Doc. 14-8) shows Plaintiff was assessed $51,141 in income tax on
12-26-11 (Doc. 14-8, page 2). It is undisputed that the 2010 tax liability was recorded at the
IRS as of December 26, 2011, which was 2 months before the February 29, 2012 action by
the IRS.
Congress has provided methods by which a taxpayer can challenge an assessment See
26 C.F.R. S 601.103(c) (explaining options available to a taxpayer). A taxpayer may pursue
an internal appeal with the IRS, see 26 C.F.R. S 106, sue for a refund in federal court, see 28
U.S.C. 1346(a)(1), 26 U.S.C. SS 6511, 7422, or appeal the assessment to the Tax Court, see
26 U.S.C. SS 6213, 6214.
None of these methods would permit a claim based on Plaintiffs allegations under the
7433 claim. Plaintiffs current action under 7433 deals with the timing of agents visit, their
lack of prior consent to communicate with Plaintiff without his representatives at Morgan
Lewis, both in violation of 6304, and harassment and abuse related to a media leak in
violation of 6304(b).
D. There is authority that any claim under Chapter 64, Collection, which encompasses
an alleged unlawful act in violation of 6304, may trigger 7433 liability.
This section references Plaintiffs argument that the waiver of sovereign immunity in
section 7433 includes any violation of section 6304. (Doc. 17, page 2). Plaintiff further
references his Brief (Doc 15-1, page 18) Moreover, the collection action that this civil
action was filed under 7433, is improper communication and other claims about
communication under 6304.
In Miller v. United States, 66 F.3d 220 (9th Cir. 1995) the Ninth Circuit said that
Because the statutory requirements of notice and demand are under 6303, chapter 64,
Collection, notice and demand is a collection procedure [under 7433].(emphasis added).
The Court then said, in the next sentence Therefore, an unlawful act in connection with
notice and demand could trigger 7433. The Court should determine whether or not the
ruling in Miller should be interpreted to show that if a alleged violation of 6303 is a
collection procedure, or action under 7433, whether that also extends to 6304.
The ruling in Miller encompasses whether an alleged violation of law under Chapter
64 of the Internal Revenue Code may trigger 7433. In the present matter, Plaintiff alleges
violations under chapter 64, Collection, specifically 6304.
In the legislative history of 6304, shown in Senate Report 105-174 (1997-1998), the
U.S. Senate said prior to enactment of 6304 the Present Law is The Fair Debt Collection
Practices Act provides a number of rules relating to debt collection practices. Among these
are restrictions on communication with the consumer. Under the heading Reasons for
change, the Senate states The Committee believes that the IRS should be at least as
considerate to taxpayers as private creditor are rehired to with their customers [under
FDCPA]. Accordingly, the Committee believe that it is appropriate to require the IRS to
comply with applicable portions of the Fair Debt Collection Practices Act. This references
Doc. 11 29, 30 and Doc. 15-1, pages 2-5.
E. There is authority to support Plaintiffs argument that the questions asked by the
special agents were about collection.
Defendants sent Plaintiff a notice with the amount of his 2010 tax liability on
December 26, 2011. (Doc. 14-8, page 2, Notice issued, CP 0014). According to 26 U.S.C.
6303, the notice sent by Defendants can only occur after an assessment of a tax. See
6303. It is not in dispute that the Interview occurred on February 26, 2012, after December
26, 2011. This references Plaintiffs argument that the allegations in the Amended Complaint
about the substance of the questions asked are not naked speculation. (Doc. 17, page 3)
F. There is authority that under 6303, Notice and Demand, a written notice of a
taxpayers liability is a collection procedure, which, if unlawful, falls under 7433.
Notice under 6303 of a tax liability occurs after an assessment of a tax.
Written notice of a tax liability, under the plain language in 6303, occurs after an
assessment of a tax. See 26 U.S.C. 6303. The present matter, under 6304 and 7433 is
partially about verbal communication of a tax liability., regarding tax year 2010. The Court
should determine, using the authority in Miller, if in fact a written notice under Chapter 64,
Collection, can be held to be a collection action, whether or not a communication under
6304, also under Chapter 64, Collection, should be held to have the same interpretation. In
the present matter the special agents asked if any payments had been made on the 2010 tax
year income tax liability.
Plaintiff submits that it is undisputed that on December 26, 2011 Defendant IRS
issued a notice (Doc.14-8, page 2) to Plaintiff via U.S. mail, under 6303, which based on
the authority in Miller occurred after an assessment of tax. The 2010 notice is referenced in
the Amended Complaint (Doc. 11, page 17).
This references Plaintiffs argument that February 2012 events, as claimed under
7433 and 6303, were a collection action (Doc. 15-1, pages 7-20).
Civil Penalties
A. There is authority supporting that the financial condition of the taxpayer is relevant
in determining, de novo, whether or not the penalties should be refunded for
reasonable cause due to undue hardship.
To establish reasonable cause the taxpayer must show that he or she exercised
ordinary business care and prudence. Courts will consider all the facts and circumstance of
the taxpayers financial situation to determine whether or nor the taxpayer exercised
ordinary business care and prudence. East Wind Indus., Inc. v. U.S., 196 F.3d 499, 507 (3d
Cir. 1999). This references Plaintiffs argument (Doc. 15-1, page 40) that due to his
Calendar No. 602
100T CONGRESS REPORT
2d Session SENATE 100-309
TAXPAYER RIGHTS AND EXCISE TAX
COLLECTION PROCEDURES
REPORT
OF THE
COMMITTEE ON FINANCE
UNITED STATES SENATE
to accompany
S. 2223
MARCH 29 (legislative day, MARCH 21), 1988.-Ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1988
19-010
CONTENTS
Page
I. Legislative B ackground .......................................................................................... 1
II. E xplanation of the B ill .......................................................................................... 2
TITLE I-TAXPAYER BILL OF RIGHTS ......................................................... 2
A . T axpayer R ights ..................... I ...................................................................... . 2
1. Disclosure of rights of taxpayers (sec. 101) ................... 2
2. Taxpayer interview procedures (sec. 102) .......................................... 2
3. Taxpayers may rely on written advice of Internal Revenue
Service (sec. 103) .................................................................................... 4
4. Taxpayers assistance orders (sec. 104) ............................................... 5
5. Office of Inspector General (sec. 105) ................................................ 5
6. Basis for evaluation of IRS employees (sec. 106) .............................. 6
7. Procedures relating to IRS regulations (sec. 107) ............................ 7
8. Explanation of tax liability and penalties (sec. 108) ....................... 8
9. Installment payment of tax liability (sec. 109) ................................. 8
10. Assistant Commissioner for Taxpayer Services (sec. 110) ............. 9
B . Levy and Lien P rovisions ............................................................................. . 9
1. Levy and distraint (sec. 111) ............................................................... 9
2. Review of jeopardy levy and assessment procedures (sec. 112) ..... 11
3. Administrative appeal of liens (sec. 113) ........................................... 12
C. Proceedings by Taxpayers .............................................................................. 13
1. Awarding of costs and certain fees in administrative and civil
action s (sec. 121) .................................................................................... 13
2. Civil cause of action for damages sustained due to failure to
release lien (sec. 122) ........................................................................... 14
3. Civil cause of action for damages sustained due to unreasonable
actions by the IR S (sec. 123) ................................................................ 15
D . T ax C ourt Jurisdiction .................................................................................. . 16
1. Jurisdiction to restrain certain premature assessments (sec.
1 3 1 ) .......................................................................................................... 1 6
2. Jurisdiction to enforce overpayment determinations (sec. 132) .... 17
3. Jurisdiction to review certain sales of seized property (sec. 133). 17
4. Jurisdiction to redetermine interest on deficiencies (sec. 134) ...... 18
5. Jurisdiction to modify decisions in certain estate tax cases (sec.
13 5 ) .......................................................................................................... 19
6. Refund jurisdiction for the Tax Court (sec. 136) .............................. 20
TITLE II-EXCISE TAX PROVISIONS .............................................................. 21
A. Collection and Exemption Procedures for Excise Taxes on Diesel
and Nonaviation Fuels (secs. 201-203) ..................................................... 21
B. Modification of Distilled Spirits Wine and Flavors Credit (sec. 204) .... 24
C. Exception From Distilled Spirits Occupational Tax for Certain Small
P lants (sec. 205) ............................................................................................ . 25
D. Increase in Gas Guzzler Excise Tax (sec. 206) .......................................... 26
TITLE III-MISCELLANEOUS PROVISION .................................................... 26
Debt Collection: Extension of Program for IRS Collection of Non Tax
Debts Owed to Federal Agencies (sec. 301) .............................................. 26
I1. B udget E ffects of the B ill ........................................................................................ 27
IV. Regulatory Impact and Other Matters to be Discussed Under Senate
R u le s ....................................................................................................................... 28
A . R egulatory Im pact .......................................................................................... 28
B . O th er M atters .................................................................................................. 29
V. Changes in Existing Law Made by the Bill ......................................................... 29
Reasons for change
The committee believes that an additional civil cause of action is
warranted to compensate taxpayers for damages arising out of the
wrongful failure of an IRS employee to release a lien.
Explanation of provision
The bill provides taxpayers with the right to sue the Federal
Government in Federal district court or Tax Court if any IRS em-
ployee knowingly or negligently fails to release a lien on the tax-
payer's property as required under the Code. Taxpayers may recov-
er the costs of the action and damages equal to the greater of (1)
the actual direct economic damages sustained by the taxpayer
which, but for the actions of the IRS, would not have been sus-
tained, or (2) $100 per day (up to $1000) for each day the failure
continues during the period that begins ten days after the taxpayer
provides written notice to the IRS of the failure to release the lien.
This written notice must be provided by the taxpayer after the con-
clusion of the 30-day period during which the IRS is required to re-
lease the lien. The IRS is authorized to establish reasonable re-
quirements concerning the form and manner of the written notice.
The committee anticipates that the requirements imposed by the
IRS with respect to the written notice will require only information
concerning the name and taxpayer identification number of the
taxpayer, information concerning the type and location of the prop-
erty subject to the lien, and any information that is necessary to
establish that the lien should be released.
The IRS has authority to settle administratively claims under
this provision. A judgment for damages under this provision may
not be awarded by a court unless the taxpayer has exhausted ad-
ministrative remedies. In addition, the actual economic damages
recoverable by a taxpayer are to be reduced to the extent that the
damages could reasonably have been mitigated by the taxpayer.
Taxpayers have two years after discovery of an erroneous failure
by the IRS to release a lien in which to bring an action under this
provision.
Effective date
This provision applies to taxpayer notices provided and damages
arising after the date of enactment.
-3. Civil cause of action for damages due to unreasonable action by
the IRS (sec. 123 of the bill and new sec. 7433 of the Code)
Present law
Taxpayers do not have a specific right to bring an action against
the Government for damages sustained due to unlawful actions
taken by an IRS employee.
Reasons for change
The committee believes that taxpayers should be provided a civil
cause of action to compensate them for damages that arise out of
16
unlawful actions or inaction of IRS employees that occur during
the determination or collection of Federal taxes.
Explanation of provision
The bill provides taxpayers with the right to sue the Federal
Government in Federal district court or Tax Court for damages if
in connection with the determination or collection of any Federal
tax, an officer or employee of the IRS carelessly, recklessly, or in-
tentionally disregards any provision of Federal law or any regula-
tion promulgated under the Internal Revenue Code. The taxpayer
may recover the costs of the action plus actual direct economic
damages sustained by the taxpayer as a proximate result of the un-
lawful actions or inaction of the IRS employee.
A taxpayer may not recover under this provision if the taxpayer
was contributorily negligent. In addition, the damages recoverable
under this provision are to be reduced to the extent that the dam-
ages could reasonably have been mitigated by the taxpayer.
The IRS has authority to settle administratively claims under
this provision. A judgment for damages under this provision may
not be awarded by a court unless the taxpayer has exhausted ad-
ministrative remedies. A taxpayer's claim under this provision is
barred unless the action is commenced within two years after the
discovery by the taxpayer of the improper IRS action. If the Tax
Court or district court determines that the taxpayer's lawsuit is
frivolous or groundless, the court may impose a penalty on the tax-
payer of up to $10,000.
Effective date
The provision applies to actions of IRS officers or employees that
occur after the date of enactment.
D. TAX COURT JURISDICTION
1. Jurisdiction to restrain certain premature assessments (sec. 131
of the bill and secs. 6213 and 7482 of the Code)
Present law
Jurisdiction to restrain IRS assessment and collection of tax rests
solely with the Federal district courts. Consequently, even though
as a general rule no assessment or collection of tax may be made
until the decision of the Tax Court has become final, a taxpayer
with a case before the Tax Court who is faced with a premature
IRS assessment is forced to challenge that assessment in Federal
district court.
Reasons for change
The committtee believes that generally both taxpayers and the
Government are well served by permitting related issues to be liti-
gated in the same forum.
100TH CONGRESS H O
2d Session I HOUSE OF REPRESENTATIVES
REPORT
100-1104
TECHNICAL AND MISCELLANEOUS
REVENUE
ACT OF 1988
CONFERENCE
REPORT
TO ACCOMPANY
H.R. 4333
Volume I of 2 Volumes
OCTOBER 21, 1988.-Ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON: 1988
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, DC 20402
100TH CONGRESS I REPORT
2d Session HOUSE OF REPRESENTATIVES 100-1104
TECHNICAL AND MISCELLANEOUS REVENUE ACT OF 1988
OCTOBER 21, 1988.-Ordered to be printed
Mr. ROSTENKOWSKI, from the committee of conference,
submitted the following
CONFERENCE REPORT
[To accompany H.R. 4333]
The committee of conference on the disagreeing votes of the two
Houses on the amendment of the Senate to the bill (H.R. 4333) to
make technical corrections relating to the Tax Reform Act of 1986,
and for other purposes, having met, after full and free conference,
have agreed to recommend and do recommend to their respective
Houses as follows:
That the House recede from its disagreement to the amendment
of the Senate and agree to the same with an amendment as fol-
lows:
In lieu of the matter proposed to be inserted by the Senate
amendment insert the following:
SECTION 1. SHORT TITLE; ETC.
(a) SHORT TITLE.-This Act may be cited as the "Technical and
Miscellaneous Revenue Act of 1988".
(b) DEFINITIoNs. -For purposes of this Act-
(1) 1986 cODE.-The term '1986 Code" means the Internal
Revenue Code of 1986.
(2) REFORM ACT.-Except where incompatible with the intent,
the term "Reform Act" means the Tax Reform Act of 1986.
(C) CLERICAL AMENDMENT.-Paragraph
(29) of section 7701(a) of
the 1986 Code is amended by striking out "of 1954 " and inserting in
lieu thereof "of 1986".
(d) TABLE OF CONTENTS.-
TITLE I-TECHNICAL CORRECTIONS TO TAX REFORM ACT OF 1986
Sec. 1001. Amendments related to title I of the Reform Act.
Sec. 1002. Amendments related to title II of the Reform Act.
Sec. 1003. Amendments related to title III of the Reform Act.
Sec. 1004. Amendments related to title IV of the Reform Act.
Sec. 1005. Amendments related to title V of the Reform Act.
Sec. 6229. Taxpayers may rely on written advice of Internal Revenue Service.
Sec. 6220. Taxpayer assistance orders.
Sec. 6231. Basis for evaluation of Internal Revenue Service employees.
Sec. 6232. Procedures relating to Internal Revenue Service regulations.
Sec. 6233. Content of tax due, deficiency, and other notices.
Sec. 6234. Installment payment of tax liability.
Sec. 6235. Assistant Commissioner for taxpayer services.
PART II-LEVY AND LIEN PROVISIONS
Sec. 8236. Levy and distraint.
Sec- 6237. Review of jeopardy levy and assessment procedures.
Sec. 6238. Administrative appeal of liens.
PART III-PROCEEDINGS BY TAYPA YERS
Sec. 62,39. Awarding costs and certain fees in administrative and court proceedings.
Sec. 6240. Civil cause of action for damages sustained due to failure to release lien.
Sec. 6241. Civil cause of action for damages sustained due to certain unauthorized
actions by internal revenue service.
Sec. 6242. Assessable penalty for improper disclosure or use of information by prepar-
ers of returns.
PART IV-TAx COURT JURISDICTION
Sec. 6243. Jurisdiction to restrain certain premature assessments.
Sec. 6244. Jurisdiction to enforce overpayment determinations.
Sec. 6245. Jurisdiction to review certain sales of seized property.
Sec. 6246. Jurisdiction to redetermine interest on deficiencies.
Sec. 6247. Jurisdiction to modify decisions in certain estate tax cases.
Subtitle K-Other Administrative Provisions
Sec. 6251. Exchange of information.
Sec. 6252 Provisions relating to previously required studies.
Sec. 6252 Repeal of secretarial authority to prescribe class lives.
Sec. 6254. Amendments related to Crude Oil Windfall Profit Tax Act of 1980.
Subtitle L-Provisions Relating to Corporations and Personal Holding Companies
Sec. 621^8. Authority to pay refunds to certain fiduciaries of insolvent members of af-
filiated groups.
Sec. 62,7. Application of net operating loss limitations to bankruptcy reorganiza-
tions.
Sec. 628. Application of section 7.503 of 1,986 Code for purposes of section 10222(b) of
Revenue Act of 1987.
Sec. 627.9. Interest earned by brokers or dealers not taken into account as personal
holding company income.
Sec. 6280. Treatment of certain bank holding companies.
Sec. 6281. Authority to waive appraisal requirement for certain charitable contribu-
tions of property.
Sec. 6282 Distributions by cooperative housing corporations.
Subtitle M-Miscellaneous Provisions
Sec. 6301. Repeal of limit on long-term bonds.
Sec. 6,02. One-year extension of credit for producing fuel from a nonconventional
source.
Sec 6303. Certain discharge of debt income not included in adjusted book income.
Sec. 6,304. Nonconventional fuels credit.
Sec. 6305- Treatment of certain family services providers.
TITLE VII-RAILROAD UNEMPLOYMENT AND RETIREMENT PROGRAMS
Sec. 7001. Short title.
Sec- 7002. References to Railroad Unemployment Insurance Act.
Subtitle A-Financing Provisions
Sec. 7101. Amendments relating to definition of "compensation".
Sec. 7102. Contribution adjustments.
Sec. 71031. Administrative expenses.
Sec. 7104. Notification to employer.
"(3) PERIOD FOR BRINGING ACTION.-Notwithstanding any
other provision of law, an action to enforce liability created
under this section may be brought without regard to the
amount in controversy and may be brought only within 2 years
after the date the right of action accrues.
"(e) NOTICE OF FAILURE TO RELEASE LIEN.-The Secretary shall
by regulation prescribe reasonable procedures for a taxpayer to
notify the Secretary of the failure to release a lien under section
6325 on property of the taxpayer."
"(b) CLERICAL AMENDMENT.-The table of sections for subchapter
B of chapter 76 of the 1986 Code is amended by striking out the
item relating to section 7432 and inserting in lieu thereof the follow-
ing new items:
"Sec. 7432. Civil damages for failure to release lien.
"Sec. 7433. Cross references. "
"(c) EFFECTIVE DATE.-The amendments made by this section
shall apply to notices provided by the taxpayer of the failure to re-
lease a lien, and damages arising, after December 31, 1988.
SEC. 6241. CIVIL CA USE OF ACTION FOR DAMA GES SUSTAINED DUE TO CER-
TAIN UNAUTHORIZED ACTIONS BY INTERNAL REVENUE SERV-
ICE.
(a) IN GENERAL. -Subchapter B of chapter 76 of the 1986 Code (re-
lating to proceedings by taxpayers and third parties) is further
amended by redesignating section 7433 as section 7434 and by in-
serting after section 7432 the following new section:
"SEC. 7433. CIVIL DAMAGES FOR CERTAIN UNAUTHORIZED COLLECTION
A CTIONS.
"(a) IN GENERAL.-If in connection with any collection of Federal
tax with respect to a taxpayer, any officer or employee of the Inter-
nal Revenue Service recklessly or intentionally disregards any provi-
sion of this title, or any regulation promulgated under this title,
such taxpayer may bring a civil action for damages against the
United States in a district court of the United States. Except as pro-
vided in section 7432, such civil action shall be the exclusive remedy
for recovering damages resulting from such actions.
"(b) DAMAGES.-In any action brought under subsection (a), upon
a finding of liability on the part of the defendant, the defendant
shall be liable to the plaintiff in an amount equal to the lesser of
$100,000 or the sum of-
"(1) actual, direct economic damages sustained by the plain-
tiff as a proximate result of the reckless or intentional actions
of the officer or employee, and
"(2) the costs of the action.
"(c) PAYMENT AUTHORITY.-Claims pursuant to this section shall
be payable out of funds appropriated under section 1304 of title 31,
United States Code.
"(d) LIMITATIONS. -
"(1) REQUIREMENT THAT ADMINISTRATIVE REMEDIES BE EX-
HAUSTED.-A judgment for damages shall not be awarded
under subsection (b) unless the court determines that the plain-
tiff has exhausted the administrative remedies available to
such plaintiff within the Internal Revenue Service.
"(2) MITIGATION OF DAMAGES.-The amount of damages
awarded under subsection (b)(1) shall be reduced by the amount
of such damages which could have reasonably been mitigated
by the plaintiff.
"(3) PERIOD FOR BRINGING ACTION. -Notwithstanding any
other provision of law, an action to enforce liability created
under this section may be brought without regard to the
amount in controversy and may be brought only within 2 years
after the date the right of action accrues.
(b) DAMAGES FOR FRIVOLOUS OR GROUNDLESS CLAIMS.-
(1) IN GENERAL.-Section 6673 of the 1986 Code (relating to
damages assessable for instituting proceedings before the Tax
Court primarily for delay, etc.) is amended by inserting "(a) IN
GENERAL.-" before "Whenever" and by adding at the end
thereof the following new subsection:
"(b) CLAIMS UNDER SECTION 7433.-Whenever it appears to the
court that the taxpayer's position in proceedings before the court in-
stituted or maintained by such taxpayer under section 7433 is frivo-
lous or groundless, damages in an amount not in excess of $10,000
shall be awarded to the United States by the court in the court's
decision. Damages so awarded shall be assessed at the same time as
the decision and shall be paid upon notice and demand from the
Secretary.
(2) CLERICAL AMENDMENT.-The heading for section 6673 of
the 1986 Code is amended by striking out "TAX".
(c) CLERICAL AMENDMENT.-The table of sections for subchapter B
of chapter 76 of the 1986 Code is further amended by striking out
the item relating to section 7433 and inserting in lieu thereof the
following new items:
"Sec. 7433. Civil damages for certain unauthorized collection actions.
"Sec. 7434. Cross references."
(d) EFFECTivE DATE.-The amendments made by this section
shall apply to actions by officers or employees of the Internal Reve-
nue Service after the date of the enactment of this Act.
SEC. 6242. ASSESSABLE PENALTY FOR IMPROPER DISCLOSURE OR USE OF
INFORMATION BY PREPARERS OF RETURNS.
(a) IN GENERAL.-Part I of subchapter B of chapter 68 of the 1986
Code (relating to assessable penalties) is amended by adding at the
end thereof the following new section:
"SEC. 6712. DISCLOSURE OR USE OF INFORMATION BY PREPARERS OF RE-
TURNS.
"(a) IMPOSITION OF PENALTY.-If any person who is engaged in
the business of preparing, or providing services in connection with
the preparation of, returns of tax imposed by chapter 1, or any
person who for compensation prepares any such return for any other
person, and who-
"(1) discloses any information furnished to him for, or in con-
nection with, the preparation of any such return, or
"(2) uses any such information for any purpose other than to
prepare, or assist in preparing, any such return,
shall pay a penalty of $250 for each such disclosure or use, but the
total amount imposed under this subsection on such a person for
any calendar year shall not exceed $10,000.
And the Senate agree to the same.
DAN ROSTENKOWSKI,
SAM GIBBONS,
J.J. PICKLE,
CHARLES B. RANGEL,
PETE STARK,
BILL ARCHER,
Guy VANDER JAGT,
Managers on the Part of the House.
LLOYD BENTSEN,
SPARK MATSUNAGA,
DANIEL PATRICK MOYNIHAN,
MAX BAUCUS,
DAVID L. BOREN,
BOB DOLE,
Managers on the Part of the Senate.
0
89-542 (504)
59010
Calendar No. 341
105TH CONGRESS REPORT
" !
SENATE
2d Session 105174
INTERNAL REVENUE SERVICE RESTRUCTURING AND
REFORM ACT OF 1998
APRIL 22, 1998.Ordered to be printed
Mr. ROTH, from the Committee on Finance,
submitted the following
REPORT
[To accompany H.R. 2676]
The Committee on Finance, to which was referred the bill (H.R.
2676) to amend the Internal Revenue Code of 1986 to restructure
and reform the Internal Revenue Service, and for other purposes,
having considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
CONTENTS
Page
I. Legislative Background .................................................................................... 7
II. Explanation of the Bill ..................................................................................... 8
Title I. Executive Branch Governance and Management of the IRS .... 8
A. IRS Restructuring and Creation of IRS Oversight Board ......... 8
1. IRS restructuring and mission (secs. 10011002) ............... 8
2. Establishment and duties of IRS Oversight Board (sec.
1101) ..................................................................................... 10
B. Appointment and Duties of IRS Commissioner and Chief
Counsel and Other Personnel .................................................... 17
1. IRS Commissioner and other personnel (secs. 1102(a) and
1104) ..................................................................................... 17
2. IRS Chief Counsel (sec. 1102(a)) ........................................... 18
C. Structure and Funding of the Employee Plans and Exempt
Organizations Division (EP/EO) (sec. 1101) .......................... 19
D. Taxpayer Advocate (secs. 1102 (a), (c), and (d)) ......................... 21
E. Treasury Office of Inspector General; IRS Office of the Chief
Inspector (secs. 1102(a) and 1103) ............................................. 25
F. Prohibition on Executive Branch Influence Over Taxpayer Au-
dits (sec. 1105) ............................................................................. 33
G. IRS Personnel Flexibilities (secs. 12011205) ............................ 34
Title II. Electronic Filing .......................................................................... 39
A. Electronic Filing of Tax and Information Returns (sec. 2001) .. 39
B. Due Date for Certain Information Returns (sec. 2002) ............. 40
2
C. Paperless Electronic Filing (sec. 2003) ....................................... 41
D. Return-Free Tax System (sec. 2004) ........................................... 42
E. Access to Account Information (sec. 2005) ................................. 42
Title III. Taxpayer Protection and Rights ............................................... 43
A. Burden of Proof (sec. 3001) .......................................................... 43
B. Proceedings by Taxpayers ............................................................ 47
1. Expansion of authority to award costs and certain fees
(sec. 3101) ............................................................................. 47
2. Civil damages for collection actions (sec. 3102) ................... 49
3. Increase in size of cases permitted on small case calendar
(sec. 3103) ............................................................................. 49
4. Expansion of Tax Court jurisdiction to responsible person
penalties (sec. 3104) ............................................................. 50
5. Actions for refund with respect to certain estates which
have elected the installment method of payment (sec.
3105) ..................................................................................... 51
6. Tax Court jurisdiction to review an adverse IRS deter-
mination of a bond issues tax-exempt status (sec. 3106) . 52
7. Civil action for release of erroneous lien (sec. 3107) ........... 54
C. Relief for Innocent Spouses and for Taxpayers Unable to
Manage Their Financial Affairs Due to Disabilities ................ 55
1. Spousal election to limit joint and several liability on
joint return (sec. 3201) ........................................................ 55
2. Suspension of statute of limitations on filing refund
claims during periods of disability (sec. 3202) .................. 60
D. Provisions Relating to Interest and Penalties ........................... 61
1. Elimination of interest differential on overlapping periods
of interest on income tax overpayments and underpay-
ments (sec. 3301) ................................................................. 61
2. Increase in overpayment rate payable to taxpayers other
than corporations (sec. 3302) .............................................. 62
3. Elimination of penalty on individuals failure to pay dur-
ing period of installment agreement (sec. 3303) ............... 63
4. Mitigation of failure to deposit penalty (sec. 3304) ............. 64
5. Suspension of interest and penalties where Secretary fails
to contact individual taxpayer (sec. 3305) ......................... 64
6. Procedural requirements for imposition of penalties and
additions to tax (sec. 3306) ................................................. 65
7. Personal delivery of notice of penalty under section 6672
(sec. 3307) ............................................................................. 65
8. Notice of interest charges (sec. 3308) ................................... 66
E. Protections for Taxpayers Subject to Audit or Collection Ac-
tivities .......................................................................................... 67
a. Due Process ............................................................................ 67
i. Due process in IRS collection actions (sec. 3401) ................. 67
b. Examination Activities .......................................................... 69
i. Uniform application of confidentiality to taxpayer commu-
nications with federally authorized practitioners (sec.
3411) ..................................................................................... 69
ii. Limitation on financial status audit techniques (sec.
3412) ..................................................................................... 71
iii. Software trade secrets protection (sec. 3413) ..................... 71
iv. Threat of audit prohibited to coerce tip report alternative
commitment agreements (sec. 3414) .................................. 75
v. Taxpayers allowed motion to quash all third-party
summones (sec. 3415) .......................................................... 75
vi. Service of summones to third-party recordkeepers per-
mitted by mail (sec. 3416) ................................................... 76
vii. Prohibition on IRS contact of third parties without tax-
payer pre-notification (sec. 3417) ....................................... 77
c. Collection Activities ................................................................ 78
i. Approval process for liens, levies, or seizures (sec. 3421) ... 78
ii. Modification to certain levy exemption amounts (sec.
3431) ..................................................................................... 78
3
iii. Release of levy upon agreement that amount is
uncollectible (sec. 3432) ....................................................... 79
iv. Levy prohibited during pendency of refund proceedings
(sec. 3433) ............................................................................. 79
v. Approval required for jeopardy and termination assess-
ments and jeopardy levies (sec. 3434) ................................ 80
vi. Increase in amount of certain property on which lien
not valid (sec. 3435) ............................................................. 81
vii. Waiver of early withdrawal tax for IRS levies on em-
ployer-sponsored retirement plans or IRAs (sec. 3436) .... 82
viii. Prohibition of sales of seized property at less than mini-
mum bid (sec. 3441) ............................................................. 83
ix. Accounting of sales of seized property (sec. 3442) .............. 84
x. Uniform asset disposal mechanism (sec. 3443) ................... 85
xi. Codification of IRS administrative procedures for seizure
of taxpayers property (sec. 3444) ....................................... 85
xii. Procedures for seizure of residences and businesses (sec.
3445) ..................................................................................... 86
d. Provisions Relating to Examination and Collection Activi-
ties ......................................................................................... 87
i. Procedures relating to extensions of statute of limitations
by agreement (sec. 3461) ..................................................... 87
ii. Offers-in-compromise (sec. 3462) .......................................... 88
iii. Notice of deficiency to specify deadlines for filing Tax
Court petition (sec. 3463) .................................................... 90
iv. Refund or credit of overpayments before final determina-
tion (sec. 3464) ..................................................................... 91
v. IRS procedures relating to appeal of examinations and
collections (sec. 3465) .......................................................... 91
vi. Application of certain fair debt collection practices (sec.
3466) ..................................................................................... 93
vii. Guaranteed availability of installment agreements (sec.
3467) ..................................................................................... 93
F. Disclosures to Taxpayers .............................................................. 94
1. Explanation of joint and several liability (sec. 3501) .......... 94
2. Explanation of taxpayers rights in interviews with the
IRS (sec. 3502) ..................................................................... 95
3. Disclosure of criteria for examination selection (sec.
3503) ..................................................................................... 96
4. Explanation of appeals and collection process (sec. 3504) .. 96
5. Explanation of reason for refund denial (sec. 3505) ............ 97
6. Statements to taxpayers with installment agreements
(sec. 3506) ............................................................................. 97
7. Notification of change in tax matters partner (sec. 3507) .. 98
G. Low-Income Taxpayer Clinics (sec. 3601) ................................... 99
H. Other Provisions ........................................................................... 99
1. Cataloging complaints (sec. 3701) ........................................ 99
2. Archive of records of Internal Revenue Service (sec. 3702) 100
3. Payment of taxes (sec. 3703) ................................................. 102
4. Clarification of authority of Secretary relating to the mak-
ing of elections (sec. 3704) ................................................... 103
5. IRS employee contacts (sec. 3705) ........................................ 103
6. Use of pseudonyms by IRS employees (sec. 3706) ............... 104
7. Conference of right in the National Office of IRS (sec.
3707) ..................................................................................... 104
8. Illegal tax protestor designations (sec. 3708) ...................... 105
9. Provision of confidential information to Congress by whis-
tleblowers (sec. 3709) ........................................................... 105
10. Listing of local IRS telephone numbers and addresses
(sec. 3710) ............................................................................. 106
11. Identification of return preparers (sec. 3711) .................... 106
12. Offset of past-due, legally enforceable State income tax
obligations against overpayments (sec. 3712) ................... 107
13. Moratorium regarding regulations under Notice 98 11
(sec. 3713(a)(1)) .................................................................... 107
14. Sense of the Senate regarding Notices 98 5 and 98 11
(sec. 371 (a)(2) and (b)) ........................................................ 110
93
Appeals conferences for taxpayers seeking appeals in rural or re-
mote areas.
Effective Date
The provision is effective as of the date of enactment.
vi. Application of certain fair debt collection practices (sec. 3466 of
the bill and new sec. 6304 of the Code)
Present Law
The Fair Debt Collection Practices Act provides a number of
rules relating to debt collection practices. Among these are restric-
tions on communication with the consumer, such as a general pro-
hibition on telephone calls outside the hours of 8:00 a.m. to 9:00
p.m. local time, and prohibitions on harassing or abusing the con-
sumer. In general, these provisions do not apply to the Federal
Government.
Reasons for Change
The Committee believes that the IRS should be at least as con-
siderate to taxpayers as private creditors are required to be with
their customers. Accordingly, the Committee believes that it is ap-
propriate to require the IRS to comply with applicable portions of
the Fair Debt Collection Practices Act, so that both taxpayers and
the IRS are fully aware of these requirements.
Explanation of Provision
The provision makes the restrictions relating to communication
with the taxpayer/debtor and the prohibitions on harassing or
abusing the debtor applicable to the IRS by incorporating these
provisions into the Internal Revenue Code. The restrictions relating
to communication with the taxpayer/debtor are not intended to
hinder the ability of the IRS to respond to taxpayer inquiries (such
as answering telephone calls from taxpayers).
Effective Date
The provision is effective on the date of enactment.
vii. Guaranteed availability of installment agreements (sec. 3467 of
the bill and sec. 6159 of the Code)
Present Law
Section 6159 of the Code authorizes the IRS to enter into written
agreements with any taxpayer under which the taxpayer is allowed
to pay taxes owed, as well as interest and penalties, in installment
payments if the IRS determines that doing so will facilitate collec-
tion of the amounts owed. An installment agreement does not re-
duce the amount of taxes, interest, or penalties owed. However, it
does provide for a longer period during which payments may be
made during which other IRS enforcement actions (such as levies
or seizures) are held in abeyance. Many taxpayers can request an
installment agreement by filing form 9465. This form is relatively

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